Auto Finance Data Show Opportunities and Risks
The share of subprime, longest loan terms grow in Q4 as consumers take on more debt over longer terms to afford higher vehicle prices, Experian research finds.
Average loan totals and monthly loan amounts for both new- and used-vehicle transactions rose in the fourth quarter.
Pexels/RDNE Stock Project
Subprime consumers are a growing segment of the automotive finance market, according to the latest data.
As of the fourth quarter, subprime borrowers made up 15% of all U.S. vehicle financing, its biggest share for that quarter since 2021, credit reporting agency Experian said.
“As affordability remains top of mind, both lenders and consumers are adapting, reflecting broader trends in credit patterns and vehicle financing behavior,” said head of the company’s automotive insights, Melinda Zabritski.
The subprime share was up 5% quarter-over-quarter, according to Experian. For new-vehicle financing, it increased by 14% to nearly 7%, while subprime used-vehicle borrowing grew by about 2% to about 22½%.
Prime new-vehicle borrowers, meanwhile, fell 3% in the quarter and by 2% for used-vehicle transactions, Experian said.
Not surprisingly, the average new-vehicle loan amount was up in the quarter, surging 4% to $43,582. The average monthly payment jumped 3% to $767, according to Experian.
On the used-vehicle side, the average loan total rose 3% to $27,528, and the average monthly payment was up about 2% to $537.
Interest rate fell in the quarter by about half a percentage point for new-vehicle financing to 6.37% and by 3% for used to 11.26%.
Despite that slight relief, longer loan terms continued to increase. The percentage of new-vehicle loans of 73 to 84 months rose to nearly 30% and for used loans to about 29%, Experian said. Those longer than 85 months also climbed, to 2% for new vehicles and 1% for used.
“Consumers and lenders are finding ways, such as extending loan terms, to make the financing fall within a budget,” Zabritski said. “It will be important to monitor how some of the trends evolve over the next 12-18 months.”
DIG DEEPER: Buyer Satisfaction Up Despite High Prices
More F&I
Four-Figure Loan Payments on the Rise
A LendingTree analysis found that location, age and credit score play a role in the rising amount of auto loan borrowers who make monthly payments of $1,000 or more.
Read More →
APCO Holdings Acquires Fidelity Dealer Services
The finance-and-insurance product provider says the addition strengthens EasyCare’s reach across key markets.
Read More →
Tariffs Could Raise Insurance Premiums
As U.S. import tariffs affect repair costs, consumers might find it more affordable to replace a damaged vehicle, according to recent Insurify tariff analysis.
Read More →
Smaller Loans, Longer Terms
The youngest generation of car buyers is more likely to finance less expensive vehicles, more than half of generation Z consumers borrowing less than $25,000.
Read More →
Ensure Your Clients Are Sure About Reinsurance
Industry experts recently broke down the complicated profit center at Agent Summit. Learn what’s relevant and what’s new to share with your dealers.
Read More →
Car Loans More Plentiful
May access opens up, as risk segments figured largely in the increased availability, Cox Automotive reported.
Read More →
First-Quarter Sees Long Auto Loan Growth
Experian data show more consumers are tapping the method, along with refinancings, to afford buying. Meanwhile, subprime borrowers are getting more access.
Read More →
Auto Consumer Anxiety Presents Opportunity
A survey of U.S. drivers found the majority are concerned about finances and the economy, but those fears make many ready to buy vehicle-protection products.
Read More →
New-Vehicle Financing Hits Record
Consumers are seeking ways to make financing new-vehicle purchases manageable, from extended loan terms to smaller down payments, according to Edmunds.
Read More →
Survey Reveals What Won't Fix What's Breaking Car Sales
AutoPayPlus says extra-long auto loans are trapping consumers and threatening the dealer trade-in cycle, and that the industry is leveraging the wrong tools to combat high MSRPs.
Read More →